A.G. Gancarski
A FloridaPolitics.com report on how exposure to Global Ministries Foundation properties tanked the Memphis municipal housing bond market did not escape the notice of Jacksonville City Council President-in-waiting Lori Boyer.
In the Jacksonville City Council Finance Committee meeting Monday, Boyer wanted to know if dilapidated properties at places like Washington Heights and Eureka Garden could affect Jacksonville’s municipal housing bonds, if the state took notice and punished those bond issuers. That’s what the state of Tennessee did in Memphis.
Short answer: No, because Global Ministries Foundation never would have passed the level of scrutiny applied to projects by the JHFA.
“The Eureka Garden financing could never have been approved by the Jacksonville Housing Finance Authority, because it didn’t meet the standards of the JHFA,” said the group’s financial advisor, Mark Hendrickson, in Monday’s committee meeting.
“The JHFA became aware of that financing [from the previous mayoral administration and said] ‘no, do not approve it.’”
“While not illegal, it clearly circumvented the process,” he added.
Councilman Bill Gulliford wanted to know if there was a way to “more clearly define the process so that this doesn’t happen in the future.”
“We really need to slam that door shut in the future,” Gulliford added.
Eureka Garden, Hendrickson said, never approached the JHFA, and in fact skirted the process.
“We do a credit underwriter report that’s very thorough. You could just do a Google search to know that there are issues with Global Ministries,” Hendrickson added.
Religiously affiliated nonprofits tend to predominate in older facilities.bNew construction deals tend to be for-profit developers, Hendrickson added.
“One of the concerns I had when the whole Eureka Garden deal came out was that because it was a nonprofit … it was not on the tax rolls,” Boyer said.
“It was a dead fish project from the beginning,” concluded Finance Chair Bill Gulliford.
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In 2015, Gulliford’s son, Tripp Gulliford, called to the attention of Jacksonville Mayor Lenny Curry the unusual process Global Ministries Foundation used to secure financing, with help from former Mayor Alvin Brown, for its inroads Jacksonville’s low-income housing market.
GMF secured tax-free bonds from Santa Rosa County’s Capital Trust Agency (CTA) to buy its Jacksonville complexes.
“CTA will essentially finance anything, with no third-party credit underwriting, lack of ongoing monitoring, and no requirements beyond the minimums in the code …. schemes to earn interest on bond proceeds and to pay fees to financing professionals. CTA has also experienced several defaults on multifamily issues that were poorly structured … [and] have suffered from poor management and lack of capital to properly maintain the physical property,” Tripp Gulliford wrote, quoting internal JHFA documents from 2012.
As well, “… the deals [often] involve acquisition of existing properties with no mechanism in place to ensure that the rehabilitation is adequate.”
Instead, the sham rehab is just a means to a “property flip,” the younger Gulliford added.
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While Boyer’s immediate concerns were relieved, she still sees major issues ahead for Jacksonville and its process related to such properties, and is determined to make sure the city doesn’t face this mess again.
“Prospectively,” Boyer wondered, “how do we prevent entities from approving things within [our] jurisdictional boundaries,” which the city has to “clean up afterwards?”
“I don’t know how or when we’re afforded the opportunity to have input,” Boyer added.
Current ordinance and policy guidance is unclear about whether or not the council can compel entities like Global Ministries Foundation from going ahead without the OK of the JHFA, Boyer said.
While she’s aware that in the case of Memphis the “bondholders are really out the money” and that because the city was involved, “Memphis couldn’t issue more bonds,” Boyer believes there needs to be more active preventive measures taken to avoid these disasters, including, perhaps, Duval and Santa Rosa counties combining forces and appealing to Washington for stronger oversight.
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Another issue in play: the nonprofit status of Global Ministries Foundation, one which strikes Councilwoman Boyer as ironic given the comment of her colleague, Councilman Reggie Brown, that GMF needed to be able to make money.
“Why would it be tax exempt if it’s a for-profit business?,” Boyer asked. “If it’s for-profit, it should be paying taxes.”
Nonprofit entities are a mixed bag, said Boyer. Some are “legitimate and well-run.”
Others, clearly, are not. And those failed actors create burdens for the city, including tax dollars that are needed for what Boyer called “enhanced services,” which the city pays for while absorbing costs because the owners are exempt from millage rates.
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Expect more movement on these issues soon. While the headlines about Global Ministries Foundation are lurid, they are the tip of the iceberg relative to other issues policymakers are compelled to address.
